Legislature(1999 - 2000)

02/02/1999 10:08 AM House O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
        HOUSE SPECIAL COMMITTEE ON OIL & GAS                                                                                    
                  February 2, 1999                                                                                              
                     10:08 a.m.                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
ORGANIZATIONAL MEETING                                                                                                          
                                                                                                                                
TAPE(S)                                                                                                                         
                                                                                                                                
99-1, SIDE(S) A & B                                                                                                             
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Representative Jim Whitaker, Chairman, convened the House Special                                                               
Committee on Oil & Gas meeting at 10:08 a.m.                                                                                    
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Committee members present at the call to order were Representatives                                                             
Whitaker, Dyson, Ogan, Harris, Kemplen, Brice and Smalley.                                                                      
Representatives Porter and Phillips were excused.                                                                               
                                                                                                                                
SUMMARY OF INFORMATION                                                                                                          
                                                                                                                                
CHAIRMAN WHITAKER introduced staff, Shannon Grynkewich, and stated                                                              
that the committee will be meeting on Tuesdays and Thursdays at                                                                 
10:00 a.m., unless otherwise noted.  Committee packets will be                                                                  
delivered to offices by noon the preceding day of a meeting.  A                                                                 
quorum of five is necessary to take action.  The general order of                                                               
business pertaining to bills will be as follows:  testimony by the                                                              
sponsor, testimony by the Administration, testimony from the public                                                             
and committee discussion.                                                                                                       
                                                                                                                                
CHAIRMAN WHITAKER further noted that he expects a busy session                                                                  
relating to oil and gas issues.  He cited the following meetings:                                                               
                                                                                                                                
     February 4, 1999 - ARCO Alaska, Incorporated                                                                               
     February 11, 1999 - BP Exploration (Alaska) Incorporated                                                                   
     February 16, 1999 - Exxon Company, U.S.A.                                                                                  
     February 23, 1999 - a sponsor group for a liquefied                                                                        
     natural gas (LNG) pipeline                                                                                                 
                                                                                                                                
CHAIRMAN WHITAKER further stated that his approach for this                                                                     
committee is to be goal oriented.  The committee will function as                                                               
a catalyst for the continued and expanded utilization of Alaska's                                                               
vast oil and gas resources.  Alaska's oil industry is experiencing                                                              
a new depression because of extraordinarily depressed oil prices,                                                               
a situation that the committee can do little to affect.  Alaska's                                                               
fledgling gas industry, on the other hand, provides an opportunity                                                              
to serve as a catalyst for expansion of this vital industry.                                                                    
Alaska currently accounts for 1 percent of world gas production all                                                             
of which is produced from Cook Inlet by Phillips Petroleum and                                                                  
exported to Japan.  Alaska's North Slope contains over 100 trillion                                                             
cubic feet of natural gas, some used to utilize oil recovery, none                                                              
of which has been sent to market, however.  It is a huge commodity                                                              
resource, therefore, it is important to determine if it can be                                                                  
taken to market feasibly.  The committee will take the following                                                                
path:                                                                                                                           
                                                                                                                                
     1.   Determine the current status of LNG;                                                                                  
     2.   Determine the current status of gas-to-liquid (GTL)                                                                   
     processing;                                                                                                                
     3.   Develop an understanding of the comparison between                                                                    
     LNG  and GTL and their markets;                                                                                            
     4.   Determine relative value to the state of LNG and                                                                      
GTL;                                                                                                                            
     5.   Provide an endorsement for a course of action, based                                                                  
          on the relative value (LNG, GTL, or a combination                                                                     
     of both);                                                                                                                  
     6.   Determine the effects of the merger between Exxon                                                                     
     and Mobile on the state, north slope gas to market,                                                                        
     and competition for additional oil production.                                                                             
                                                                                                                                
CHAIRMAN WHITAKER further noted that the committee will not be                                                                  
antagonistic towards the oil and gas industry, the backbone of                                                                  
Alaska's economy.  The committee will do all that it can to assist                                                              
them in their endeavor to flourish their industries.  Nonetheless,                                                              
it is the committee's duty to protect the state's interest when                                                                 
there are divergences.                                                                                                          
                                                                                                                                
Number 258                                                                                                                      
                                                                                                                                
REPRESENTATIVE SMALLEY suggested scheduling a discussion from the                                                               
state and industry in regards to the pipeline leak on the Kenai                                                                 
Peninsula.  Chairman Whitaker so noted his suggestion.                                                                          
                                                                                                                                
Number 268                                                                                                                      
                                                                                                                                
REPRESENTATIVE DYSON replied the leak on the Kenai Peninsula was a                                                              
corrosion problem.  He suggested an update on corrosion detection,                                                              
especially from Alyeska in regards to the pipeline and terminal.                                                                
Chairman Whitaker so noted his suggestion.                                                                                      
                                                                                                                                
Number 304                                                                                                                      
                                                                                                                                
REPRESENTATIVE HARRIS stated that he hopes the committee does                                                                   
everything that it can to enhance and develop the oil and gas                                                                   
industry.  He is interested in seeing a gas pipeline/GTL project;                                                               
it not only would effect his district but the entire state.                                                                     
                                                                                                                                
Number 328                                                                                                                      
                                                                                                                                
REPRESENTATIVE OGAN stated the committee has a big job ahead of it                                                              
knowing that there is a storm ahead.  In nautical terms, the state                                                              
needs to batten down the hatches and plan a strategy to get around                                                              
the storm.                                                                                                                      
                                                                                                                                
Number 355                                                                                                                      
                                                                                                                                
REPRESENTATIVE KEMPLEN agreed that there is a need for planning.                                                                
He would like to see the committee explore and examine the industry                                                             
to enhance the industry's engine.                                                                                               
                                                                                                                                
Number 380                                                                                                                      
                                                                                                                                
CHAIRMAN WHITAKER announced that the committee is bipartisan.  A                                                                
good idea is a good idea; it doesn't depend on which side of the                                                                
isle it comes from.  Chairman Whitaker called on former                                                                         
Representative Mark Hodgins to explain the committee's actions                                                                  
during the last legislature.                                                                                                    
                                                                                                                                
Number 395                                                                                                                      
                                                                                                                                
FORMER REPRESENTATIVE HODGINS explained the main focus of the House                                                             
Special Committee on Oil & Gas the last legislature was to                                                                      
facilitate the progress of a gas pipeline project.  The stranded                                                                
gas bill sent the message that Alaska is willing and wanting to                                                                 
work with customers to build a gas pipeline.                                                                                    
                                                                                                                                
FORMER REPRESENTATIVE HODGINS further noted the other issues the                                                                
committee covered.  They were as follows: the makeup of the North                                                               
Slope ownership in regards to a gas pipeline; Point Thomson in                                                                  
regards to a gas pipeline; other technologies pertaining to GTL;                                                                
the impact of a gas pipeline on communities; spurs of a gas                                                                     
pipeline into Southcentral; the gasification of the communities                                                                 
along a gas pipeline corridor(s); the Kiroshima (ph) spill in Dutch                                                             
Harbor in regards to 470 funds and the Alaska Chadux Corporation;                                                               
and low-sulphur diesel in regards to air quality.                                                                               
                                                                                                                                
Number 559                                                                                                                      
                                                                                                                                
REPRESENTATIVE OGAN asked former Representative Hodgins to explain                                                              
470 funds and the Alaska Chadux Corporation.                                                                                    
                                                                                                                                
FORMER REPRESENTATIVE HODGINS replied the 470 funds is a nickel-                                                                
per-barrel tax on all oil from the North Slope to Valdez up to a                                                                
$50 million threshold.  Agencies were using the proceeds for                                                                    
operations, however, so it never got to the $50 million level.                                                                  
Therefore, the nickel was split - 3 cents goes to the fund and 2                                                                
cents goes to the Department of Environmental Conservation (DEC)                                                                
for spill response equipment and supplies.  Alaska Chadux is a                                                                  
spill response team around the state.  It was able to respond                                                                   
quickly in Dutch Harbor because it was better prepared than any                                                                 
other group.  Alaska Chadux, however, was not on the response list                                                              
for the DEC indicating that the state is not ready for a spill.                                                                 
                                                                                                                                
Number 612                                                                                                                      
                                                                                                                                
REPRESENTATIVE OGAN noted further that the Kiroshima (ph), one of                                                               
many ships that don't have a contingency spill plan, was not a                                                                  
member of the Alaska Chadux organization.                                                                                       
                                                                                                                                
Number 626                                                                                                                      
                                                                                                                                
CHAIRMAN WHITAKER asked former Representative Hodgins whether the                                                               
low-sulphur-diesel exemption is from the Environmental Protection                                                               
Agency.  Former Representative Hodgins replied yes.  Chairman                                                                   
Whitaker asked him whether ancillary costs have been identified                                                                 
inherent to not having an exemption.  Former Representative Hodgins                                                             
replied MAPCO Alaska Petroleum Incorporated, Northstar and Tesoro                                                               
testified that they could supply low-sulphur diesel sufficient                                                                  
enough for the road system in Alaska, but not the entire state.                                                                 
The conversion costs would be prohibitive for all refineries in the                                                             
state because there is not that much of a market causing a high                                                                 
price.                                                                                                                          
                                                                                                                                
Number 681                                                                                                                      
                                                                                                                                
CHAIRMAN WHITAKER asked former Representative Hodgins whether the                                                               
exemption is area or statewide.  Former Representative Hodgins                                                                  
replied it is statewide.  He further stated that an area exemption                                                              
has been discussed for rural Alaska.                                                                                            
                                                                                                                                
Number 689                                                                                                                      
                                                                                                                                
CHAIRMAN WHITAKER asked former Representative Hodgins to comment on                                                             
the exemption time periods.  Former Representative Hodgins replied                                                              
the current exemption will go away in June or July of this year and                                                             
urged the committee to address the issue with the Department of                                                                 
Environmental Conservation.                                                                                                     
                                                                                                                                
Number 702                                                                                                                      
                                                                                                                                
REPRESENTATIVE HARRIS noted the largest spill response service                                                                  
group works out of Valdez.                                                                                                      
                                                                                                                                
TAPE 99-1, SIDE B                                                                                                               
Number 000                                                                                                                      
                                                                                                                                
REPRESENTATIVE HARRIS continued.  He suggested looking at relieving                                                             
the legal responsibilities of these organizations so that they can                                                              
respond to cruise ship spills, for example.                                                                                     
                                                                                                                                
CHAIRMAN WHITAKER stated it is important to know the direct lines                                                               
of responsibilities in regards to a cruise ship spill.                                                                          
                                                                                                                                
REPRESENTATIVE BRICE suggested inviting the Department of                                                                       
Environmental Conservation and the Coast Guard for an overview of                                                               
responsibilities and spill scenarios.  Chairman Whitaker noted his                                                              
suggestion.                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON noted that a response to a spill is                                                                        
exceptionally important and since the state deals with foreign                                                                  
bottoms it would be wise to require a vessel to inform the state                                                                
what it is prepared to do in the event of a spill.  Chairman                                                                    
Whitaker noted his comments.                                                                                                    
                                                                                                                                
COMMITTEE ACTION                                                                                                                
                                                                                                                                
The committee took no action.                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 10:58 a.m.                                                                                             
                                                                                                                                
NOTE:                                                                                                                           
                                                                                                                                
The meeting was recorded and handwritten log notes were taken.  A                                                               
copy of the tape(s) and log notes may be obtained by contacting the                                                             
House Records Office at 130 Seward Street, Suite 211, Juneau,                                                                   
Alaska  99801-1182, (907) 465-2214, and after adjournment of the                                                                
second session of the Twenty-first Alaska State Legislature, in the                                                             
Legislative Reference Library.                                                                                                  
                                                                                                                                

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